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So. Cal gas spike hammers independent stations

By   /   Friday, October 5th, 2012  /   Comments Off

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Independent gas stations in Southern California may experience price spikes and even shortages this weekend as problems at several Golden State refineries culminate to produce a supply pinch.

“My wholesale prices went from $3.98 a gallon to $5.08 a gallon, and we are now selling at $4.39 a gallon,” Sam Seng, owner of Fred’s Gas & Foodmart in Oxnard, told the Business Times via email on Oct. 4. “I am very worried when my fuels run out in two more days [about] how I am going to pay for these prices.”

Reuters reported on Oct. 5 that gas prices rose 17 cents a gallon overnight because of supply disruptions and seasonally low inventories, bringing gas to $4.49 a gallon around the Golden State. The news agency said that statewide figure is 12 cents below the record high of $4.61 reached in 2008.

ITL, a Southern California petroleum wholesaler, said there has been an “unprecedented rally” for gasoline formulated for the Los Angeles area “stemming from grave concerns about gasoline supplies.” According to the wholesaler, ExxonMobil’s Torrance refinery, Chevron’s Richmond facility and Phillip 66’s refineries have all been operating at reduced rates because of flaring issues and maintenance problems. The reduced supplies have sent traders and refiners out onto the spot markets for petroleum, which is where independent gas stations usually buy their supplies.

“The squeeze in inventory has resulted in some branded terminal outages in L.A.,” ITL said in a note to gasoline retailers. “Expectations are that suppliers will not reload product until later this week. Jobbers should be on the lookout for hefty price hikes at the racks.”

Independent gas station owners are the hardest hit by the price spike. That is because they rarely have set contracts with gasoline suppliers. That leaves them unable to lock in a predictable price the way that branded gas stations can. And if the gasoline supply becomes extremely low, wholesalers are obligated to sell to stations with contracts first – potentially leaving no gasoline for independent stations without a long-term contract.

“The small businesses like my company get hit very bad,” Seng said via email. “Because we have no contract with fuel suppliers, even [with] these $5 prices they have a limited quantity to sell us. They keep the supply to their brand names.”

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